Beat back the retail Luddites

There can be no case for romanticising the existing distribution network, which exploits stakeholders and flouts norms. Critics of FDI in retail seem to forget that there is enough room for everyone.

December 9, 2011:

The Luddites have won for the moment. A mere 10 million owners of traditional and self-organised retail and wholesale trade have held the country of 1.2 billion people to ransom and thwarted progress. Their pyrrhic victory has been achieved by evoking the fear of 40 million people associated with the sector being thrown out of jobs and livelihood. This is gross misrepresentation of facts.

It is yet another demonstration (like ‘central planning is more efficient than a regulated market') of how untruth can triumph when repeated often and loudly enough. The retail sector is destined to almost double in size in the next 10 years by simply keeping pace with growth. By 2022, the size of the unorganised retail sector is estimated to reach nearly $1,000 billion. Of this, the ‘mom and pop stores' are expected to have a market share of 84 per cent, giving them a business volume of $840 billion — a huge expansion from their current market of $450 billion!

NO TEARS FOR TRADERS

Can anyone opposing the entry of FDI in retail trade and thereby preventing the modernisation of the sector please explain how an expansion in business from $450 million to more than $800 billion will result in the death, demise, destitution and deprivation of this most resilient and intrepid group of traders? Munshi Premchand, the doyen among Hindi writers, who so eloquently described the exploitative and ruthless ways of this class, must surely be turning in his grave at this travesty of the trader receiving the support and sympathy of political leaders who are ostensibly wedded to the welfare of the aam aadmi.

A greater irony could not have been visualised, and can come about only in our country where competitive populism seems to have trumped any rational discourse.

BASELESS PARALLEL

The other fear that has been purposely spread is that this step will take India back to becoming a colony of foreign powers. This is done by resurrecting the ghost of the East India Company that entered India in 1612 by asking for a trading concession from Emperor Jehangir. The rest as they say is colonial history. Are those evoking this fear serious in arguing that India in 2011 is as vulnerable, divided, weak and inept as it was four centuries ago? If they truly believe this, both their integrity and nationalism must be thoroughly examined. India, today is at the cusp of attaining global power recognition. It is actively striving for and being supported by others for a permanent seat in the UN Security Council. A large number of developing and emerging economies look towards India as a model for their own development.

And, in complete contrast to this positive sentiment about our great country, some among would have us believe that a bunch of foreign retail stores, selling food, toiletries and assorted merchandise can outwit, outthink and outgun the country's leadership and elite. This reflects a very low opinion of our abilities and indeed very poor self-esteem. Can a country whose people have such a poor opinion of themselves really rise to assume global responsibilities? Can my friends in the BJP, avowedly a party with strong nationalist sentiments, not see the stark contradiction in this fear of the foreigner and their exemplary nationalism? We have to show to the world and more importantly prove to ourselves that we can determine our own destiny. This is to be achieved not by denying ourselves the progress that is possible by working with foreign investors but by acting with sagacity, foresight and resolve when and if foreign investors diverge from our national priorities.

UNREGULATED ECONOMY

I daresay that those who have opposed the entry of FDI in multi-brand retail, have done this without recognising that this is a sector that remains backward, dominated by a cash economy with all its features of non-accountability and has poor-to-horrible working conditions. The same class of traders, which is being pampered with all the political attention, does not blink an eyelid while cutting regulatory corners and flouting all rules and regulations — of which there is a plethora weighing on them. These are meant largely to be ignored and used predominantly for generating rent for the army of inspectors.

Perhaps, these features of the unorganised retail trade make it attractive to those who would rather let our economy run on cash and keep our young people trapped in low productivity and insecure jobs. It is indeed a real pity that our otherwise active civil society and consumer welfare organisations choose to ignore the poor working conditions and anti-consumer welfare aspects of the unorganised retail sector. This is as hypocritical as accepting child labour as domestic help while protesting loudly for the right to children education and against child labour otherwise.

It is also a pity that farmers' organisations have not come out more strongly in favour of large-scale organised retail trade which will give them higher returns, better terms of trade and even access to better farming practices.

The lesson from this unfortunate episode is that it is important for those who are advocating reforms for greater liberalisation and globalisation to also better organise themselves and take the trouble to present their case to the public. The setback to bringing in the FDI in retail trade demonstrates unambiguously and strongly that reforms can never be undertaken by stealth. A public case has to be built and propagated strongly to push back the Luddites.

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Comments:

For the consumers it will make no difference. The kirana merchant sells adulterated commodity to retain the profit margin and now foreign retailers will be selling genetically modified branded food items that could also be harmful.

from:
D Venkatramana

Posted on: Dec 10, 2011 at 04:57 IST

It is not a LUddite cry that has stopped the move to open up retail trade to foreign investors. It is the victory for massive public opoinion. A research into the apttern of trde for Ecuadorian bananas revealed that the plantation worker receivves jsut one pence for eveyr pound, whereas the nplantation owner receives 10 opence, the trading company 31 opence (of which Eu tariff is 5 pence), the ripener?
distributor 17 pence, and the final retailer-that ias the supermarket wallahs 40 pence. For a 40pound box of Costa Rican bananas sold in the UIK supermarketws for the equivalent of 14.69 pounds, the grower would ahve received a maximum of 2.22 pounds, only 15 percent. A Sunday lunch of a South MUmbai resident would perhaps contain six or seven items that have all the way travelled 25,000 miles to his reach his lunchntable. All these are for the benefit of the suipermarkets which are facing a declining market in the west. They are wa powerful force. .